Property Valuation
The 'effective age' of a building in appraisal is:
AThe same as the chronological age
BThe age the building appears to be based on its condition and maintenance history✓ Correct
CThe age of the oldest component in the building
DThe original construction date registered with the county
Explanation
Effective age is the appraiser's estimate of the age the building appears to be, given its actual physical condition. A well-maintained 40-year-old building may have an effective age of 20 years, while a poorly maintained 20-year-old building may have an effective age of 30 years.
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Key Terms to Know
Appraisal
A professional estimate of a property's market value prepared by a licensed or certified appraiser.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
DepreciationA reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
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